I thank the UP Women Lawyers Circle for this opportunity to be with you today. I should say that you have chosen a most appropriate theme for this year’s business conference: Eye on 20/20: What businesses need to focus on for 2020.

On the part of the economy, I assure you that we are looking at a very good year after this one.

Our economy is growing at an average of 6.5 percent in the first 10 quarters of the Duterte administration. A clear growth momentum has been built. For this year, the Duterte administration maintains 7 percent growth as a fighting target.

We managed to sustain the higher-than-6 percent growth last year because of strong domestic demand and robust investment and capital formation rates.

As a share of GDP, capital formation, which is the most comprehensive measure of investment, rose to 27 percent last year compared to 25 percent in 2017. This is remarkably higher than the 21-percent average share of investments to GDP for the past 16 semesters.

In the first eleven months of last year, foreign direct investments reached 9.1 billion US dollars. This is almost as high as the 10 billion US dollar FDI inflows recorded for the whole of 2017. We are confident the full year FDI level can reach or even exceed the previous record high. By the way, in 2017, $10 billion as investments was double the amount in 2015.

Meanwhile, the strong domestic demand growth is driven, to a large extent, by the stronger purchasing power among our consumers attributable in part to the hefty reduction in the personal income tax rates due to the first package of the tax reform program.

The robust double-digit growth in sales and the high-profit margins of publicly-listed retail giants and real estate companies in 2018 prove that Filipinos have significantly increased their spending power.

For instance, Jollibee Foods Corporation posted sales of 153 billion pesos in 2018, 16 percent higher than in 2017. Its net income was also up by 17 percent at 8 billion pesos.

McDonald’s Philippines posted sales of 34 billion pesos in the first 9 months of 2018, 12 percent higher than the same period in 2017. Since 2017, McDonalds has opened one store a week mostly outside of Metro Manila.

In the first 9 months of 2018, San Miguel Food and Beverage posted sales of 207 billion pesos, up by 15 percent from the same period last year. Its net income was also up by 17 percent at 23 billion pesos.

In the real estate industry, Ayala Land Incorporated posted sales amounting to 163 billion pesos last year, 18 percent higher than the 2017 level. It reported net income of around 29 billion pesos in 2018, or an increase of 16 percent from 2017. In addition, SM Prime Holdings posted sales of 104 billion pesos last year, 17 percent higher than the 2017 level. Its net income was also up by 17 percent at 32 billion pesos.

The aggressive expansion of the real estate and fast-food industries in areas outside Metro Manila account for a large part of their earnings in 2018. This demonstrates how a fast-growing economy complemented by business-friendly reforms can become a potent tool in creating wealth across the country.

Meanwhile, the Philippines’ leading commercial banks also posted strong interest income growth on the back of strong customer loan growth last year. Based on published data, BDO Unibank, Inc. saw its net interest income rise by 20 percent to 98 billion pesos on the back of 17 percent customer loan growth in 2018. Its net income is around 33 billion pesos in 2018, or an increase of 16 percent from the previous year.

Metrobank reported its net interest income increasing by 12 percent to 69 billion pesos last year on the back of 20 percent customer loan growth. It reported net income of around 22 billion pesos in 2018, or an increase of 21 percent from the previous year.

The first full year of the implementation of the first tax reform package also succeeded in accomplishing its revenue goals. We credit both the tax reform and improvements in revenue administration for the dramatic increase in our revenue collections. In 2018, national government revenues rose by 15 percent to 2.85 trillion pesos while tax revenues grew by 14 percent to 2.57 trillion pesos.

Our tax effort, which reached 14.7 percent last year, is now significantly better than the regional benchmark. This is the highest tax effort we have ever achieved in the past 20 years.

Expenditures also posted its fastest rate of expansion since the beginning of the Duterte Administration. With its continued growth, spending in 2018 reached 3.41 trillion pesos, 21 percent higher than the 2017 level. Our expenditure effort in 2018 reached 19.6 percent, the highest we have ever achieved in the past 28 years.

Public spending, particularly on the infrastructure modernization program, has also been one of the major drivers of growth. In the first ten quarters of the Duterte administration, actual disbursements on infrastructure and other capital outlays reached 1.64 trillion pesos, equivalent to 4 percent of GDP. We already exceeded the programmed infrastructure and other capital outlays spending of 1.63 trillion pesos for the said period.

Compare this with the economic investment of the previous administration. In all its six years, the previous administration spent only about 1.57 trillion pesos in infrastructure and other capital outlays. This is just 78 percent of their programmed spending of 2.01 trillion pesos for their entire term and is equivalent to only 2.3 percent of GDP.

Our aggressive spending on infrastructure demonstrates that the lead agencies in the Build, Build, Build program are moving faster than expected. The old problem of absorptive capacity has been solved.

By the end of the Duterte administration’s term, we expect to invest over 8 trillion pesos in the infrastructure program. By then, we would be able to close the country’s infrastructure gap. This represents major pump priming for the economy. We have already seen private enterprises prepare to participate in the Build, Build, Build program by importing capital goods from abroad. While the massive importation widened the balance of trade deficit in the short term, the capital goods that have been acquired will continue to create wealth for our economy for many years to come.

The ambitious Build, Build, Build program is made possible by the fiscal space provided by many years of fiscal discipline. That fiscal discipline allowed us to work down our debt to eminently manageable proportions and achieve sound credit ratings that allow us to borrow at more economic costs. International confidence is seen in the willingness of our development partners and foreign governments to help finance the large infrastructure projects.

Apart from budgetary support from the additional revenues we are generating from the new tax reform law and official development assistance or ODA from our friends in the region, we have also adopted a hybrid public-private partnership model. This is where, in the initial projects, we use ODA instead of waiting for the private sector to raise financing commercially. The hybrid model enables us to use cheaper money and move more quickly to get the projects started.

While we rely on ODA inflows to get the infrastructure program going, we take great care to keep debt service low. It is not true that the infrastructure program is mainly driven by financing from China. As of 2018, our total project debt exposure to China is only 0.66 percent of our total debt exposure. Comparatively, our total project debt to Japan is 9 percent of our total debt exposure.

By 2022, when most of the financing for the Build, Build, Build program should have been accessed, our project debt to China will constitute around 4.5 percent of the total debt. While the project debt to Japan will be around twice as large at 9.5 percent of total debt. There is no danger of us being drowned by Chinese debt.

We borrow with great prudence, aware that it is the taxpayer who ultimately pays for the debt. We always keep in mind that the money we borrow comes from the taxes dutifully paid by the people of the countries that have continued to generously support us.

The government continuous to manage our debt responsibly. Our debt-to-GDP ratio continued its downward trend at 41.9 percent in 2018 from 68.5 percent in 2005. We continue to prudently manage our obligations and we are confident that the rapid expansion of the domestic economy will enable us to decrease our debt ratio further to 38.6 percent by 2022.

Meanwhile, on the issue of the growing number of foreign workers in the country, especially those involved in off-shore gaming operations, be assured that this administration will make sure that Filipinos are not disadvantaged. We want fair treatment for our countrymen who are dutifully paying their income taxes. We are working closely with the Bureau of Internal Revenue, the Department of Labor and Employment, the Department of Justice, the Bureau of Immigration, and Pagcor to come up with a comprehensive list of foreign workers in the country to ensure that they comply with our laws, particularly on the payment of their personal income tax.

The Duterte administration is also relentless in pushing reforms that will improve the ease of doing business in the country. Through 2018, we saw the passage of several reform measures. These include the Ease of doing Business Act, the National ID System, and the Personal Property Security Act. In the first months of this year, President Duterte signed several laws including an act upgrading our Corporation Code, which was largely drafted by Tessie Herbosa, an act strengthening the Bangko Sentral ng Pilipinas, a law providing for universal health care, and a law shifting rice trading to a tariff regime. All of these pieces of legislation add up to reinforce our market-enhancing institutions.

Later this year, we hope to see enacted into law the remaining packages of the comprehensive tax reform program. By 2020, we are confident that all tax reform packages will be in place, especially Package 2 which includes the reduction of corporate income tax rates and the rationalization of fiscal incentives. The tax reform packages will bring us a more modern tax system conducive to investments. It will raise revenues to fund our infrastructure and social development programs. It will bring our tax effort to levels compatible with the most dynamic economies of the region.

As inflation begins to ease and taper off to levels within the 2 to 4 percent target we have set for 2019, we are confident our economy will come out stronger this year.

2019 is the year to complete the policy and tax reforms. 2020 will be the year our people start feeling what it means to be an upper middle-income economy. We will be the growth leader for the region and an inspiring study for other emerging economies. Already, the Philippines is being described as Asia’s new economic powerhouse.

While we rank as among the best performing economies in this dynamic part of the world, growth is not the final goal of all our efforts. We seek a more dynamic and competitive economy to bring down poverty rates and create more opportunities for our people.

The economic team stands by its goal of bringing down poverty incidence from 21.6 percent in 2015 to just 14 percent by the end of President Duterte’s term.

Through this brief description of our economic outlook, I hope to infect you with the enthusiasm that keeps us working hard each day. More important, I hope to inspire you to move your enterprises at the pace we imagine our economy to be moving in the coming period.